The next Open Enrollment period for health plans offered under the Affordable Care Act begins Nov. 1, 2016; with a plan effective date of Jan. 1, 2017.

If you have individual or small group coverage, now there are more changes coming. We want to let you know about the proposed rate increases in the individual and small group markets, the changing dynamics of health insurance for 2017, and which carriers and plans will be available, so you know your options and make the best decision for you and your practice.

Rate increases are coming.

The individual plan rate filings for Texas are significant.

  • Blue Cross, on its individual HMO plans, has filed for 58.60% and 57.33% increases on the two products it offers.
  • Aetna filed for a 20% increase. Aetna announced in mid-August it will offer individual Affordable Care Act on-exchange (subsidy-eligible) plans in just four states (down from 15): Delaware, Iowa, Nebraska and Virginia; but will continue to offer an off-exchange individual product option for 2017.
  • Scott & White filed for a 31-33% increase.
  • Humana filed for a 45% increase. Its sale to Aetna is being challenged by the Department of Justice (DOJ). Within days of the DOJ lawsuit blocking the sale, Humana announced it will reduce the number of counties in which it sells individual exchange plans in 2017 by approximately 88%, and is pulling out of the off-exchange individual health insurance market in all states.
  • Cigna filed for a 23% increase. Its sale to Anthem is also being challenged by the DOJ. It’s too early to know if it will offer plans in Texas for 2017 or not.
  • There are also a few regional or local plans available in Texas that have filed for increases in the 9-22% range, including Oscar and Molina.

These filed proposed rate increases are all being reviewed to evaluate whether they are based on reasonable cost assumptions and solid evidence, and give consumers the chance to comment on them. The final rates will probably not be available until Nov. 1, when Open Enrollment starts. You will have until Dec. 15 to change plans or pick new ones with a Jan. 1 effective date, or until Dec. 31 if your plan is terminating Jan. 1.

The small group plan filed rate increases range from 8-19% depending on the company, which seem low compared to the individual plans. We believe this will be a more stable rate platform for the next couple of years, and continue to offer true PPO as well as HMO plan options. It appears for 2017, small group PPO rates will be much lower than individual HMO rates.

Consolidation: fewer companies, plans; smaller, more-controlled networks

In the name of efficiency and cost savings, ACA provisions encouraged providers and hospitals to band together in Accountable Care Organizations (ACO). An ACO is a group of doctors, hospitals, and other health care providers that work together to provide better, more coordinated care. This consolidation has grown since the ACA was passed; now less than 50% of physicians own practices.¹

The ACA and the rise of ACOs caused many national carriers to either exit the health insurance business entirely (because of the scale needed to profitably stay in the business), or to withdraw from some of the states where they offer plans, especially states that started healthcare co-ops. Only 7 of the original 23 state co-ops are operational, with several of the remaining co-ops facing significant financial issues. Fortunately, Texas does not have a co-op plan, so it’s not having to deal with this issue. However, what’s happened is the individual market is contracting with fewer companies, and there are fewer plans and smaller, more-controlled provider networks.

This consolidation is all about size and scale, and insurance companies have been trying to create efficiencies by having more insureds. The number of new enrollees for 2017 is not projected to increase much. In fact, the biggest growth has been in Medicaid rolls, which have increased by over 15 million nationally. The ACA’s risk adjustment, reinsurance, and risk corridors programs were designed to work together to offset the potential effects of adverse selection and risk selection to carriers. These programs and the risk corridors in particular are scheduled to be eliminated by the end of 2016. Currently, Congress and the Obama administration are in litigation about these funds being released for 2016, as Congress says it did not authorize them.

In Texas, PPOs are probably going to be a thing of the past for individual plans in 2017. What will remain are HMO and EPOs. HMOs typically require you have a PCP (Primary Care Physician) to manage your care and for specialist referrals, and there is no out-of-network coverage, other than for emergencies; or with higher deductible plans, coinsurance exposure, and out-of-pocket maximums. EPO models often require you to choose a PCP (Primary Care Physician) or pay more if you see a specialist, and there is no out-of-network coverage, other than for emergencies.

It is critical you check out the network of the insurance company you select for 2017 to make sure your providers and hospitals are in-network.

Who’s left?

In the individual market, Blue Cross will offer only HMO and HMO Plus plans.

As previously mentioned, the Aetna and Humana sale is still moving forward, even as the companies start to fight the DOJ lawsuit; however we shouldn’t count on Humana as an option for new individual plans in 2017. Aetna has tentatively announced it will offer off-exchange individual plans in Texas in 2017. Aetna will continue to offer EPO plans (no out-of-network coverage, other than for emergencies).

If the Cigna sale to Anthem does not go through, it’s possible Cigna might offer plans in 2017 in select markets—typically metropolitan areas. The regional or area-specific (DFW-Houston-Austin only, for instance) plans (such as Scott & White, Oscar and Molina) will probably move towards EPO or HMO models in Texas.

United Healthcare has announced it will no longer offer plans on-or-off Exchange in Texas for 2017. It already sent out notices of termination to all its individual ACA-plan holders; the coverage will end December 31, 2016. It also sent notices to insureds with grandfathered plans (non-ACA plans), informing them the coverage will terminate at 2017 renewal time.

What are some options?

Small Group Plan

If you have a practice with at least 2 full time employees (you can be one of them), you should consider a Small Group plan, as it will probably be less expensive than individual plans, and you can still get a PPO. Keep in mind that if your spouse is the other employee, you need at least 1 other full or part time employee to have a small group.

Providing small employer health insurance can be a good way to retain and attract high quality employees while offering a lot of flexibility on plan designs. For instance you can offer more than one plan with your group—a base plan that’s less expensive for employees (perhaps an HMO with a RX and Office Copay) and PPO plan for you and your family.

Most importantly, there will be a Special Enrollment period for new groups when the mandatory employer contribution towards the employee’s premium, as well as other requirements, will be waived, which can make this an attractive option. Employees can still be on the plan, the practice (employer) is just not required to pay for a portion of their premiums. There is more paperwork involved with this option; and we can start comparing rates for small group plans beginning in October.

Individual Coverage

If a small group is not an option for you, or you don’t have other coverage available through a spouse or employer, then your only option is individual coverage. You will need to pay very close attention to the plan networks. It is critical that you check out the network of the insurance company you select for 2017 to make sure your providers and hospitals are in-network. The networks can and do change.

For individual coverage, know your risk exposure and what you are responsible for before the insurance covers the rest. For 2017, the maximum out-of-pocket for an individual is $7,150 and $14,300 for a family. This is for in-network expenses. If you have out-of-network expenses, the out-of-pocket maximum could be double or more, or not even covered. The lowest premium plans will have the highest out of pocket maximums.

When picking a plan, keep the above numbers in mind. Having a prescription drug copay and office visit are convenient plan features, but you need to consider the cost of your plan (the premium) and your total out-of-pocket exposure.

HSA (Health Savings Account)

If you have not looked at HSA plans, or didn’t think they made sense previously, you should revisit them. They offer the lowest premium, and with the tax deductibility of the contribution (as much as $7,750 for a family), could be a great way to build up a self-funding account for current and future medical expenses. This can be especially important if you have to go out of network. Also remember, with an HSA the earnings and interest accumulate tax-free, you own and control the funds, and it’s not a “use-it-or-lose-it” type of vehicle.

Church/Religious Health Share Groups

These types of arrangements have been around for many years. Essentially, you join a group and might pay or contribute a monthly amount. Your medical bills are paid from the funds available, or by others making additional contributions to cover your bill. These arrangements have stricter guidelines (than traditional insurance companies) on which medical procedures are eligible, and there is normally a lifestyle guideline where a member agrees to live a certain way, such as abstain from: illegal drug consumption, sex outside of marriage, tobacco use, and abuse of alcohol or prescription drugs.

These types of plans are not insurance, and should not be considered a substitute for insurance. The payments of medical bills through these arrangements are not guaranteed in any way. Each member is solely responsible for the payment of his or her own medical bills at all times.

Short Term Insurance

We do not recommend you go without insurance; however short-term health insurance is better than no coverage. These plans do not typically pay for pre-existing conditions, and are designed to cover a new sickness or accident (no treatment in previous 5 years). Some of the plans allow for up to 12 months of coverage before they terminate. They do not automatically renew. However CMS and other federal agencies are trying to put a three-month limit on this type of coverage. The comment period will close after this article will go to press, so short term plans might not even be an option by Nov. 1 if you need coverage for more than 3 months.

Short-term insurance and some health share plans do not meet the ACA’s Essential Health Benefits mandate, so if you have one of these plans or have no insurance, you might be subject to the ACA penalty/fee/tax. The fee is calculated 2 different ways: as a percentage of your household income, and per person. You’ll pay whichever is higher. For 2016, this is 2.5% of household income, with the maximum equaling the total yearly premium for the national average price of a Bronze plan sold through the Marketplace, or a per person fee of $695 per adult, $347.50 per child under 18, up to a maximum $2,085. Beginning in 2017, the penalty/fee/tax will rise in line with inflation.

These changes and other developments seem pessimistic if you pay for your own health insurance, especially against the backdrop of the most contentious presidential election most of us have experienced. The best option is to stay informed, get ready to review and compare coverages and options, and be ready to make a decision as soon as possible. For individual plans, this will be Nov. 1; and for small group plans, as early as October.

Disclaimer: This article was submitted the middle of August. Some information may have changed by the time this article is published.

1. New AMA Study Reveals Majority of America’s Physicians Still Work In Small Practices July 8, 2015

If you would like to receive more information, or would like to discuss the insurance options available, please feel free to contact TDA Financial Services Insurance Program at 800-677-8644, or visit tdamemberinsure.com